Things to know before mining any cryptocurrency
Understanding Cryptocurrency Mining
- What’s PoW Cryptocurrency Mining?
- Why Should you Mine Cryptocurrency?
What’s PoW Cryptocurrency Mining?
Mining cryptocurrencies has two main functions: adding new verified transactions to the blockchain digital ledger and issuing new coins.
Each time a cryptocurrency transaction is made, miners compete to secure and verify the operation. To do so, miners have to solve a complicated mathematical problem that adjusts its difficulty to ensure a stable issuance rate. Once the miner finds a hash — the output of a hash function — that is lower than the target defined by the blockchain protocol, the miner is entitled to receive the block reward. This block reward is a coin of the cryptocurrency being mined.
As more miners join a network, the mining difficulty rises, making it more difficult to be the block finder. This increase in complexity makes the process of mining time consuming and extremely energy intensive. Because of this, miners are always looking for the cheapest electricity rates and the most efficient mining hardware.